Walter Investment Management Corp. Announces Second Quarter 2010 Financial Results
TAMPA, Fla., Aug. 9 /PRNewswire-FirstCall/ -- Walter Investment Management Corp. (NYSE Amex: WAC) ("Walter Investment" or the "Company") today announced results for the quarter ended June 30, 2010.
The Company reported income before income taxes for the quarter ended June 30, 2010 of $8.9 million, or $0.33 per diluted share, as compared to income before income taxes for the year ago period of $8.6 million, or $0.41 per diluted share. Net income for the second quarter of 2010 was $8.6 million, or $0.32 per diluted share, as compared to net income for the second quarter 2009 of $89.8 million, or $4.30 per diluted share, which included a non-cash tax benefit of $81.2 million related to WIM LLC's conversion to a real estate investment trust ("REIT") as part of its spin-off and merger transactions with Hanover Capital Mortgage Holdings, Inc. ("Hanover") on April 17, 2009.
Mark J. O'Brien, Walter Investment's Chairman and CEO, said, "We continue to see attractive opportunities in the market to acquire performing and nonperforming residential loans. While these opportunities remain our primary focus as we seek to grow the business, we continue to explore other options to expand our capabilities for growth and remain committed to prudently deploying our capital to acquire assets which meet our investment criteria and return objectives."
Second Quarter 2010 Dividend Declaration
On August 3, 2010, the Board of Directors of the Company declared a dividend of $0.50 per share to shareholders of record as of August 13, 2010, which will be paid on August 27, 2010.
Second Quarter 2010 Operating Highlights
- Reflecting continued strong performance, consolidated delinquencies were 4.26 percent at June 30, 2010, as compared to 4.21 percent at March 31, 2010 and 5.06 percent at June 30, 2009. Walter Investment's delinquency rates (adjusted to reflect comparable methodologies) remain better than the most recently released Mortgage Banker's Association's subprime industry survey average by more than 50 percent.
- On an annualized basis, the asset yield for the quarter ended June 30, 2010 was 10.25 percent and the Company's interest cost on outstanding debt was 6.81 percent. The net interest margin for the quarter, which is net interest income as a percentage of average earning assets, was 5.10 percent, in-line with the second quarter of 2009.
- Loss severities were 14.3 percent in the second quarter, as compared to 11.9 percent for the first quarter of 2010 and 19.0 percent in the second quarter of 2009.
- During the second quarter of 2010, the Company paid dividends on April 30, 2010 of $12.9 million to its shareholders.
Charles E. Cauthen, Walter Investment's President and COO, said, "The diligent efforts of our field servicing organization continue to yield superior results from our portfolio. The ability to produce these solid results will support our efforts to grow the business through the second half of 2010 and beyond. Based on the early performance of our newly acquired loan pools, we expect continued superior performance from both our existing portfolio and these newly purchased pools."
Second Quarter 2010 Financial Summary
Net interest income for the quarter was $20.9 million as compared to $22.0 million in the year-ago period. The decrease reflects lower outstanding balances and lower voluntary prepayment speeds, partially offset by an improvement in seriously delinquent accounts.
The provision for loan losses was $3.4 million, compared with $3.7 million in the year ago period. The decrease from the year earlier period was primarily driven by improved loss severities.
Non-interest income was $3.2 million in the second quarter of 2010 as compared to $3.6 million in the prior year period, primarily due to lower insurance premium revenue.
Non-interest expenses decreased from $13.3 million in the second quarter of 2009 to $11.6 million for the second quarter of 2010. The decrease resulted primarily from lower legal and professional fees associated with one-time spin-off related costs in 2009 and lower insurance claims costs.
Second Quarter 2010 Liquidity Summary
At June 30, 2010, the Company had $79.3 million of cash. The Company had no borrowings under its $15 million revolving credit facility at June 30, 2010.
Purchase of Pools of Loans
During the second quarter of 2010, the Company completed the purchase of two pools of performing, fixed-rate residential loans on single-family, owner occupied residences located within the Company's existing southern United States geographic footprint. These purchases utilized $19.7 million of proceeds from the Company's 2009 equity offering.
The Company has also recently entered into letters of intent to purchase additional pools of performing and nonperforming residential loans which, when settled, are expected to utilize approximately $20 million of proceeds from the equity offering.
Conference Call Webcast
Members of the Company's leadership team will discuss Walter Investment's second quarter results and other general business matters during a conference call and live webcast to be held on Tuesday, August 10, 2010, at 10 a.m. Eastern Time. To listen to the event live or in an archive which will be available for 30 days, visit the Company's website at www.walterinvestment.com.
About Walter Investment Management Corp.
Walter Investment Management Corp. is an asset manager, mortgage servicer and mortgage portfolio owner specializing in non-conforming, less-than-prime, and other credit-challenged mortgage assets. Based in Tampa, Fla., the Company currently has $1.8 billion of assets under management and annual revenues of approximately $180 million. The Company is structured as a real estate investment trust ("REIT") and employs approximately 230 people. For more information about Walter Investment Management Corp., please visit the Company's website at www.walterinvestment.com.
Safe Harbor Statement
Certain statements in this release and in our public documents to which we refer, contain or incorporate by reference "forward-looking" statements as defined in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Walter Investment Management Corp. is including this cautionary statement to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical fact are forward-looking statements. Words such as "expect," "believe," "anticipate," "project," "estimate," "forecast," "objective," "plan," "goal" and similar expressions are intended to identify forward looking statements. Forward-looking statements are based on the Company's current belief, intentions and expectations; however, forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results, performance or achievements, to differ materially from those reflected in the statements made or incorporated in this release. Thus, these forward-looking statements are not guarantees of future performance and should not be relied upon as predictions of future events. These risks and uncertainties are contained in Walter Investment Management Corp.'s Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 2, 2010 and Walter Investment Management Corp.'s other filings with the SEC.
All forward looking statements set forth herein are qualified by this cautionary statement and are made only as of August 9, 2010. The Company undertakes no obligation to update or revise the information contained herein, including without limitation any forward-looking statements whether as a result of new information, subsequent events or circumstances, or otherwise, unless otherwise required by law.
Walter Investment Management Corp. and Subsidiaries |
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Consolidated Statements of Income |
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(dollars in thousands, except share and per share amounts) |
||||||||||
For the Three Months Ended |
For the Six Months Ended |
|||||||||
June 30, |
June 30, |
|||||||||
2010 |
2009 |
2010 |
2009 |
|||||||
Net interest income: |
||||||||||
Interest income |
$ 41,882 |
$ 44,677 |
$ 83,510 |
$ 90,506 |
||||||
Less: Interest expense |
21,022 |
22,654 |
42,296 |
45,743 |
||||||
Total net interest income |
20,860 |
22,023 |
41,214 |
44,763 |
||||||
Less: Provision for loan losses |
3,447 |
3,733 |
6,637 |
8,109 |
||||||
Total net interest income after provision for loan losses |
17,413 |
18,290 |
34,577 |
36,654 |
||||||
Non-interest income: |
||||||||||
Premium revenue |
2,167 |
2,996 |
4,858 |
6,061 |
||||||
Other income, net |
1,016 |
643 |
1,776 |
803 |
||||||
Total non-interest income |
3,183 |
3,639 |
6,634 |
6,864 |
||||||
Non-interest expenses: |
||||||||||
Claims expense |
913 |
1,373 |
1,825 |
2,662 |
||||||
Salaries and benefits |
5,858 |
5,528 |
12,839 |
9,813 |
||||||
Legal and professional |
936 |
1,896 |
1,835 |
2,600 |
||||||
Occupancy |
328 |
465 |
673 |
800 |
||||||
Technology and communication |
673 |
731 |
1,401 |
1,549 |
||||||
Depreciation and amortization |
93 |
153 |
184 |
231 |
||||||
General and administrative |
2,795 |
3,148 |
5,160 |
4,681 |
||||||
Other expense |
52 |
49 |
103 |
386 |
||||||
Related party - allocated corporate charges |
- |
- |
853 |
|||||||
Total non-interest expenses |
11,648 |
13,343 |
24,020 |
23,575 |
||||||
Income before income taxes |
8,948 |
8,586 |
17,191 |
19,943 |
||||||
Income tax expense (benefit) |
385 |
(81,225) |
516 |
(77,070) |
||||||
Net income |
$ 8,563 |
$ 89,811 |
$ 16,675 |
$ 97,013 |
||||||
Basic earnings per common and common equivalent share |
$ 0.32 |
$ 4.33 |
$ 0.62 |
$ 4.68 |
||||||
Diluted earnings per common and common equivalent share |
$ 0.32 |
$ 4.30 |
$ 0.62 |
$ 4.64 |
||||||
Weighted average common and common equivalent shares outstanding — basic |
26,414,338 |
20,750,501 |
26,379,005 |
20,750,501 |
||||||
Weighted average common and common equivalent shares outstanding — diluted |
26,512,492 |
20,910,099 |
26,456,769 |
20,910,099 |
||||||
Walter Investment Management Corp. and Subsidiaries |
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Consolidated Balance Sheets |
|||||||
(dollars in thousands, except share amounts) |
|||||||
June 30, |
December 31, |
||||||
2010 |
2009 |
||||||
ASSETS |
|||||||
Cash and cash equivalents |
$ 79,270 |
$ 99,286 |
|||||
Restricted cash |
9,668 |
8,963 |
|||||
Restricted cash of securitization trusts |
39,829 |
42,691 |
|||||
Receivables, net |
2,299 |
3,052 |
|||||
Residential loans, net of allowance for loan losses of $3,320 and $3,460, respectively |
343,080 |
333,636 |
|||||
Residential loans of securitization trusts, net of allowance for loan losses of $13,413 and $14,201, respectively |
1,272,676 |
1,310,710 |
|||||
Subordinate security |
1,823 |
1,801 |
|||||
Real estate owned |
26,963 |
21,981 |
|||||
Real estate owned of securitization trusts |
35,212 |
41,143 |
|||||
Deferred debt issuance costs |
17,795 |
18,450 |
|||||
Other assets |
6,043 |
5,961 |
|||||
Total assets |
$ 1,834,658 |
$ 1,887,674 |
|||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||
Accounts payable |
$ 613 |
$ 13,489 |
|||||
Accounts payable of securitization trusts |
399 |
556 |
|||||
Accrued expenses |
26,404 |
28,296 |
|||||
Deferred income taxes, net |
129 |
173 |
|||||
Mortgage-backed debt of securitization trusts |
1,224,407 |
1,267,454 |
|||||
Accrued interest of securitization trusts |
8,444 |
8,755 |
|||||
Other liabilities |
786 |
767 |
|||||
Total liabilities |
1,261,182 |
1,319,490 |
|||||
Stockholders' equity: |
|||||||
Preferred stock, $0.01 par value per share: |
|||||||
Authorized - 10,000,000 shares |
|||||||
- |
- |
||||||
Common stock, $0.01 par value per share: |
|||||||
Authorized - 90,000,000 shares |
|||||||
257 |
256 |
||||||
Additional paid-in capital |
124,922 |
122,552 |
|||||
Retained earnings |
446,708 |
443,433 |
|||||
Accumulated other comprehensive income |
1,589 |
1,943 |
|||||
Total stockholders' equity |
573,476 |
568,184 |
|||||
Total liabilities and stockholders' equity |
$ 1,834,658 |
$ 1,887,674 |
|||||
Walter Investment Management Corp. and Subsidiaries |
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Operating Statistics |
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(Unaudited) |
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(dollars in thousands, except per share amounts) |
||||
2010 |
2010 |
2009 |
||
Q2 |
Q1 |
Q2 |
||
30+ Delinquencies (1) |
4.26% |
4.21% |
5.06% |
|
90+ Delinquencies (1) |
2.31% |
2.89% |
2.73% |
|
Provision for Losses |
$ 3.4 |
$ 3.2 |
$ 3.7 |
|
Net Charge-offs |
$ 4.0 |
$ 3.5 |
$ 3.9 |
|
Charge-off Ratio (2) |
0.99% |
0.86% |
0.90% |
|
Allowance for Losses |
$ 16.7 |
$ 17.3 |
$ 18.3 |
|
Allowance for Losses Ratio (3) |
1.02% |
1.06% |
1.06% |
|
30+ Delinquencies (1) |
$ 75.5 |
$ 75.4 |
$ 95.4 |
|
REO (Real Estate Owned) |
62.2 |
62.0 |
55.8 |
|
TIO (Taxes, Insurance, Escrow and Other Advances) |
16.2 |
16.4 |
14.8 |
|
Nonperforming Assets (Delinquencies + REO + TIO) |
$ 153.9 |
$ 153.8 |
$ 166.0 |
|
Nonperforming Assets Ratio (4) |
8.32% |
8.24% |
8.48% |
|
Default Rate (5) |
6.37% |
5.68% |
5.51% |
|
Fixed Rate Mortgages |
5.96% |
5.55% |
5.37% |
|
Adjustable Rate Mortgages |
37.07% |
14.64% |
14.43% |
|
Loss Severity (6) |
14.30% |
11.85% |
19.00% |
|
Fixed Rate Mortgages |
11.69% |
10.43% |
13.30% |
|
Adjustable Rate Mortgages |
41.54% |
39.02% |
47.00% |
|
Number of Accounts Serviced (7) |
34,700 |
34,724 |
36,320 |
|
Total Portfolio (8) |
$ 1,850.6 |
$ 1,867.4 |
$ 1,956.5 |
|
ARM Portfolio (9) |
$ 23.5 |
$ 25.6 |
$ 29.6 |
|
Prepayment Rate (Voluntary CPR) |
3.13% |
2.64% |
4.06% |
|
Book Value per Share (10) |
$ 22.28 |
$ 22.46 |
$ 25.69 |
|
Debt to Equity Ratio |
2.14:1 |
2.16:1 |
2.59:1 |
|
(1) Delinquencies are defined as the percentage of principal balances outstanding which have monthly payments over 30 days past due. The calculation of delinquencies excludes from delinquent amounts those accounts that are in bankruptcy proceedings that are paying their mortgage payments in contractual compliance with bankruptcy court approved mortgage payment obligations. (2) The charge-off ratio is calculated as annualized net charge-offs, divided by average residential loans before the allowance for losses. (3) The allowance for losses ratio is calculated as period-end allowance for losses divided by period-end residential loans before the allowance for losses. (4) The nonperforming assets ratio is calculated as period-end non-performing assets, divided by period-end principal balance of residential loans plus REO and TIO. (5) Default rate is calculated as the annualized balance of repossessions for the quarter divided by the average total balance of the portfolio for the quarter. (6) Loss severities are calculated as the loss on sale of REO properties divided by the carrying value of REO. (7) Includes REO accounts. (8) Total portfolio includes the principal balance of residential loans, REO and TIO. (9) ARM portfolio includes the principal balance of adjustable rate residential loans and REO resulting from defaulted adjustable rate residential loans. (10) Book Value per share is calculated by dividing the Company's equity by total shares issued and outstanding of 25,743,193. |
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SOURCE Walter Investment Management Corp.
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